The provision in the state budget that will have the most significant long-term impact on the fiscal health of our state government is making few headlines. On page 406 of the budget bill is a provision that would end free enrollment into the State Health Plan for state retirees hired after Jan. 1, 2021.
State employee associations are of course opposing the move, but the math is undeniable. Current unfunded liabilities for state retiree health benefits has exploded to $44.2 billion. That’s up from $33 billion in 2010.
Moreover, the cost to cover retiree health benefits now costs taxpayers $892 million per year, according to the Treasurer’s Office. For sake of comparison, that is just shy of the $1.07 billion the state spends on its community college system.
And that figure is rising fast. In FY 2012-13, the amount was $516 million, and in FY 2000-01 it was only $87 million. This line item in the budget has ballooned 73% in just the last five years, and by more than tenfold in seventeen years. That pace is simply unsustainable.
State employee associations also claim that taking away fully-funded health benefits for retirees would “be devastating” to recruitment and retention of state workers. We’ll see.
What we do know(at least as of 2012), is that only seven other states offer to pay 90 percent or more of retiree’s health insurance premiums – even after a maximum qualifying number of years of service, and that North Carolina is one of only ten states that offer retirees a significant health insurance premium subsidy after only 20 years of service.
In other words, North Carolina currently stands out in its generosity regarding retiree health benefits, and this move would bring the state closer to the norm of other states and the private sector.
The bottom line is that this provision may just be legislatively crystallizing what the math is already telling us: these benefits are simply unsustainable and can not be continued.